Google CEO: Youtube Can Be Key for New Video Models

Google is bullish about Youtube, its user-generated content and social networking features, and has its eye on Internet video overall.

“Sometime in the Spring of last year, online video took off,” said Google CEO Eric Schmidt, speaking at a Morgan Stanley Technology Conference today. “By taking off, I mean I don't know if everyone got a camera at Easter or something, but everyone started posting everything they could think of in real time.”

That's not slowing down, he said.

“If anything, that growth rate is accelerating,” Schmidt said, “There are an increasing number of people who are using the Internet as short form entertainment.”

That spells opportunity for companies like Google — which bought Youtube last year for $1.65 billion — even though there's been a flurry of controversy lately from content owners regarding copyrighted works on that user-generated video site.

Google and Youtube have a lot to offer content holders, Schmidt said.

“We're talking to all the content companies and they're all trying to figure out how to move to this new medium, what's new is this is per-use basis business model, it's a difficult business model for them to transition to,” he said. “Our strategy is to get as much licensed content as possible, index everything, develop ad tools that will allow people to make money.”

Google shares an average of 30% of revenue with its partners, Schmidt said, sometimes more.

“We've taken the position that these models are shifting,” he said. “We will work with you to get there and we will share with you, in many cases, a majority of the revenue.”

Schmidt said he thinks Internet video viewing could hit the same levels as TV-watching today in a couple of years, and the ad dollars can be replaced online.

While Youtube has raised the ire of content owners, most recently Viacom Inc, for the broad user-based dissemination of copyrighted work, the site should be looked at as a valuable resource, Schmidt said.

“The pitch that we typically make to content owners is that somebody who has gone through Google and Youtube to find your content is very very valuable to content owners because this is a fan,” Schmidt.

Going from fan to paying customer is not a big leap, whether that pay comes in the form of advertising dollars, video sales, movie ticket sales and other products, he said.

“Every one of the large media companies has to [have], or already has, an Internet strategy,” he said. “They face some daunting issues, [such as] piracy, [and] they have an enormous rights rat's nest, a very complicated set of rights that don't necessarily allow them to do what they want to do. It slows down the process.”

And while other players will come into the Internet video market, it will shake out like any other delivery method, Schmidt predicted. A few big sites will get the lion's share of visitors, like Youtube does already.